When Colonel Edwin Drake struck oil in northwestern Pennsylvania in 1859, the first phase of the oil industry began. John D. Rockefeller emerged in those early days as a pioneer in industrial organization. When Rockefeller combined Standard Oil and 39 affiliated companies to create Standard Oil Trust in 1882, his goal was not to form a monopoly, because these companies already controlled 90% of the kerosene market.
His real goal was the economy of scale, which was achieved by combining all the refining operations under a single management structure. In doing so, Rockefeller set the stage for what historian Alfred Chandler called the “dynamic logic of growth and competition that drives modern capitalism.” With the discovery of oil at Spindletop in East Texas in 1901, a new phase of the industry began. Before Spindletop, oil was used mainly for lamps and lubrication. After Spindletop, petroleum would be used as a major fuel for new inventions, such as the airplane and automobile.
Ships and trains that had previously run on coal began to switch to oil. For the next century oil, and then natural gas, would be the world’s most important sources of energy. Since the beginning of the oil industry, petroleum producers and consumers have feared that eventually the oil would run out. In 1950, the US Geological Survey estimated that the world’s conventional recoverable resource base was about 1 trillion barrels.